With the aim of increasing loans to the agriculture sector, the Ministry of Agriculture and the Food and Agriculture Organization (FAO) have committed to scale up a tool kit dubbed “Rural Invest” that will enable farmers to design bankable business plans and projects.
The approach, that targets especially small and medium rural investment projects, will also be used by banks and other financial institutions as a planning tool to improve loan distribution to agriculture sector.
Patrick Karangwa, the Director General of Rwanda Agricultural Board, said that banks shun providing loans to investors in agriculture due to poor quality of designed projects and lack of agriculture and livestock insurance scheme.
Patrick Karangwa, director general, RAB, and Gualbert Gbehounou, the FAO representative in Rwanda committed to scale up the investment promotion tool.
“Banks are reluctant to provide agricultural loans since they fear they might not get returns. We are hopeful that by using the tool that will help design viable and bankable projects together with agriculture and livestock insurance scheme we are rolling out will de-risk the agricultural sector and unlock banks’ loans that go to the sector,” he said.
With aim to prepare sustainable agricultural investment projects and business plans in rural areas, the tool is suited for income generating projects in agriculture, livestock, fisheries, fish farming, forestry, agro-industries, tourism, transport services, handicraft manufacturing, retail stores, wholesale services and storage services.
“By 2024 we project that over 10 per cent of loans by financial institutions will be going to the agriculture sector from the current 5 per cent of banks’ loans.
It requires private-sector driven investments to reach the target as it is in line with the Fourth Strategic Plan for Agriculture Transformation (PSTA4). The new tool will increase investments and attract banks loans to finance the sector. Research shows that agriculture is even more profitable,” he said.
According to Gualbert Gbehounou, the FAO Representative in Rwanda there is no way to end poverty and hunger as per the aspirations of Sustainable Development Goals (SDGs) in SDG1 and SDG2 without helping farmers to move from subsistence to doing agriculture as business.
“Farmers have to use agriculture to become rich. Preventing hunger must start with rural farmers. We have to help them increase investments in the sector by designing bankable projects they can take to the banks and get loans. They have been not accessing to finance because their projects are not appropriately designed,” he said.
The software tool helps to introduce data into software that helps to calculate required investments, profitability, he said adding that building capacity of different institutions’ staff, farmers and financial institutions will make it easier.
“We want to engage youth in agriculture and they are ready to embrace ICT use in this sector and then help other farmers who are still lagging behind to scale up the tool,” he said.
Youth in Rwanda are estimated to be 4.1 million which is over 35 per cent of the total population.
The expert said the tool has been introduced in Latin America, Africa, Central Asia, and others.
“While it is clear that the fight against hunger must start in rural areas, it is also obvious that unfortunately, the agricultural sector suffers from serious underinvestment. Sustainable development goal 1 cannot be achieved by 2030 without a substantial increase in public and private investments in agriculture and food systems to make the world free of hunger and poverty,” he said.
He said it is estimated that additional investments of $265 billion every year are needed to achieve the two goals and of these investments, approximately $140 billion should be in agricultural and rural development.
The fund is supporting national institutions of six selected countries namely Rwanda, Tanzania, Mozambique, The Lao People’s Democratic Republic, Philippines and Bangladesh in developing national capacity to support rural entrepreneurship.
Agriculture in Rwanda meets 90 per cent of the national foods needs and generates more than 70 per cent of the country’s export revenues.